We expect the electric utility Pinnacle West Capital Corp. (PNW) to beat expectations when it reports third-quarter 2014 results on Oct 31. The company’s earnings surprise history looks unblemished over the trailing four quarters, with an average beat of 7.55%.
Why a Likely Positive Surprise?
Our proven model indicates that Pinnacle West will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is the case here as you will see below.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.30%. This is because the Most Accurate Estimate is at $2.22 per share while the Zacks Consensus Estimate is at $2.17 per share.
Zacks Rank: The combination of Pinnacle West’s Zacks Rank #3 and +2.30% ESP makes us confident of an earnings beat this quarter.
The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
What is Driving the Better than Expected Earnings?
Pinnacle West is expected to benefit from lower operating and maintenance expenses in the third quarter, which also had a positive impact on first-half results.
In addition, the gradual improvement in the economic conditions of its service territories is expected to spur demand for utility services rendered by Pinnacle West.
The company is planning to lower its carbon footprint and increase its renewable power generation portfolio, which will definitely bode well for the company in the long run.
Other Stocks to Consider
Pinnacle West is not the only firm looking up this earnings season. We also see likely earnings beats coming from the following utilities:
NRG Yield, Inc. (NYLD) has an earnings ESP of +75.44% and a Zacks Rank #1 (Strong Buy).
Consolidated Edison, Inc. (ED) has an earnings ESP of +2.80% and a Zacks Rank #2 (Buy).
The Empire District Electric Company (EDE) has an earnings ESP of +8.89% and a Zacks Rank #2 (Buy).
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